Spending spree to go on.. Brendan Montague Thursday November 28, 2002 The Lincolnshire Echo Billions of pounds of public borrowing have been announced by the Chancellor Gordon Brown. He will continue to invest in schools and hospitals even as the world economy stalls. But yesterday's pre-Budget report that the Government would rely on debt has been accepted by Lincoln's civic and business leaders. Brendan Montague found out why. INVESTMENT for schools and hospitals in Lincolnshire has been guaranteed by the Government despite a bleak forecast for the world economy. Chancellor Gordon Brown yesterday announced in his pre-Budget report that the Treasury would borrow up to £20 billion to secure his spending pledges for public services. Lincoln MP Gillian Merron last night welcomed the announcement and said her constituents should be reassured that the Government would keep its promises. The borrowing commitment has also been accepted by council and business leaders in Lincoln. They say the extra borrowing is inevitable because of the grim state of the international economy. Mr Brown insisted the new debts would be affordable and that there would be no going back on public spending promises. Delivering his pre-Budget report to the House of Commons, he said net public sector debt would be £9 billion more than he predicted at the time of the last Budget in April. The Chancellor blamed the worsening state of public finances on the global economic slowdown - which he said was the "worst for 30 years". Mr Brown also said an extra £1 billion could be "drawn on" if necessary to meet international defence obligations. Shadow chancellor Michael Howard predicted that taxes would have to rise. He told the Commons: "By spending more without reform Mr Brown has locked himself on an unsustainable course. "If spending keeps rising faster than the growth rate of the economy he will have to put up taxes again." But the Labour MP for Lincoln and Government whip Ms Merron told the Echo: "Borrowing has to be set in the context of national finances and the fact that debt has been massively reduced under this Government. "All the increases in spending for law and order, education and health are to go ahead even though the world economy is in great difficulty and that has impacted on this country. "People in Lincoln can be reassured that the Government's commitments in all those areas are still on course. "That means the extra money we have pledged for families and pensioners will go ahead and I think that's great news in difficult times." A £1 billion boost earmarked for the armed services could also benefit the local economy and hundreds of people in the constituency, she added. Industry in Lincoln - including major employer Alstom - will benefit from increased investment in training highlighted in Mr Brown's speech. Schools in the city would welcome the commitment to Enterprise in Education, Ms Merron said. Parts of Lincoln will soon be designated as enterprise zones and the pre-budget report gave more details about the benefits this would bring. This included a reduction in the cost of starting up new firms and the hiring and training of staff. The Conservative leader of Lincolnshire County Council, Ian Croft, said the Government had little choice but to honour its pledge to increase public sector spending. He said: "The Government has made a commitment in public spending and they have to consider how they are going to pay for it. "I don't think these are commitments that I would wish to disagree with and how they pay for it is for the Chancellor to decide." The council is a major employer in the county and Coun Croft gave a stark warning about proposals to add a penny to National Insurance contributions. "If Gordon Brown is going to pay for it in increased funding for the county that's fine, but if he does not then the taxpayer will have to pick it up." Lincoln City Council leader Ric Metcalfe welcomed the pre-Budget report. "I'm not too bothered about the extra borrowing, in the sense that we've got a record low level of debt," he said. "If we want the investment in public services that are necessary I don't have a problem with borrowing the money at this time." He added: "Our economy in Britain is in a better state than in many other countries - that's got to have something to do with the way the Government has acted." Coun Metcalfe said Lincoln had so far weathered the global economic storm which had proved disastrous for other countries. "At the moment there is no sign that spending is starting to drop off. Lincoln has been very much on the up. "We have been told that Alstom has a very good order book. The commercial sector in the city seems very buoyant." Lincoln Chamber of Commerce chairman David Wilson was also confident extra Government borrowing would not break the bank. "We recognised that public sector borrowing would have to increase. "We came to the same conclusion that the future is less bright than had been predicted a while ago." He welcomed the Chancellor's outspoken commitment to training and family friendly measures in the Budget. "Anything that improves the skill base and effectiveness of staff in the workplace is to be welcomed," he said. Professor of Public Policy at the University of Lincoln, Hugh Bochel, said despite the commitment to borrowing billions, the Budget had few surprises and was very "prudent". He added: "The world economy has not been growing as expected. The American economy has not been doing as well as they would have hoped. "Everybody is still suffering post-September 11 and there were the Enron and WorldCom problems which dented confidence. "Borrowing does make sense - rather than a cut in spending which the public does not seem to want, or an increase in tax which the public does not seem ready for. This report is prudent, by and large." The Chancellor said in his report that growth in Britain this year would be just 1.6 per cent against a forecast of two to 2.5 per cent at the time of the budget. Next year growth would be 2.5 to 3 per cent - compared to a previous forecast of two to 3.5 per cent, while borrowing would rise to £24 billion - up £11 billion on previous expectations. He insisted that the "strong long-term position" of public finances meant he did not need to cut his ambitious spending plans for schools and hospitals. "It would lead directly to depressed demand, rising unemployment and the old boom and bust approach," he said. "Today, in this world downturn, with a foundation of historically low levels of inflation and debt, such an option would be neither competent nor prudent." In a reference to the ongoing firefighters' pay dispute he said: "We will tolerate nothing that will put our hard won stability at risk." He warned that public sector pay rises had to be sustainable and justified by productivity increases. The Chancellor told MPs that the Government could not yield to "inflationary and unjustified pay settlements". Mr Brown tried to put the best possible gloss on the nation's prospects, telling MPs that last year, of the major economies, the British economy was the fastest growing. He added: "This year, 2002, amid the worst global slowdown for nearly 30 years, the British and North American economies will grow faster than all other major economies. "I can report that next year - in 2003 - Britain and North America are now forecast, even in a still uncertain and unstable world, to continue to be the fastest growing of all the major economies." Mr Brown said strong economic foundations meant he could avoid cutbacks during the economic downturn. The next Budget is due in April next year and the Chancellor will then make financial commitments. But the pre-Budget review has become an important indictor of how the economy is fairing and is eagerly awaited by both the public and private sectors.